Coronavirus: China, Asia manufacturing recovery to be short-lived with 2020 growth set to grind to a halt
- Asia-Pacific growth is set to be zero, worst than the global or the Asian financial crisis’, says International Monetary Fund Asia and Pacific Department chief
- Changyong Rhee says any recovery in the manufacturing sector in China and the rest of Asia needs to be viewed with caution
Any recovery in the manufacturing sector in China and the rest of Asia this year will be short lived as Asia-Pacific’s growth in 2020 is expected to grind to a halt amid the coronavirus outbreak, according to the director of the International Monetary Fund’s Asia and Pacific Department.
Changyong Rhee reinforced the severity of the impact of Covid-19 on Asia-Pacific economies, noting that growth in the region would be zero this year, much worse than the global or the Asian financial crisis’, when growth was 4.7 per cent and 1.3 per cent respectively.
Last week, the World Trade Organisation said global trade could fall by up to 32 per cent in 2020 due the damage to the economy from the coronavirus pandemic.
This has been further exacerbated by weakness in its trading partners, advanced western economies, which have suffered even harder shocks.
China, the region’s big player, is not expected to recover as well as it did during previous slowdowns such as the global financial crisis in 2007-2008, even though the IMF has forecast its economic growth rate of 1.2 per cent in 2020 will be better than most countries in the region, added Rhee.
“Many Asian countries will be forced to use large stimulus packages despite their limited fiscal base … when they rely on large stimulus packages they have to worry about the possible negative impact of the external sector especially the foreign exchange market.”
The IMF has forecast global growth to contract by 3 per cent in 2020, meaning the downturn will be the worst since the Great Depression of the 1930s.
Asia-Pacific’s overall growth this year will be zero, according to the IMF, with the advanced economies such as Australia and New Zealand expected to be hit the hardest. The IMF has forecast Australia to register a 6.7 per cent decline in growth in 2020, while New Zealand will retreat 7.2 per cent.
Among the region’s emerging countries, Thailand is the only one expected to suffer a similar decline with a fall of 6.7 per cent.
The Micronesian archipelago of Palau is expected to contract by 11.9 per cent, the Maldives by 8.1 per cent and Fiji by 5.8 per cent.
“These countries are also among the most vulnerable given the limited fiscal space, as well as comparatively underdeveloped health infrastructure,” said Rhee.
Asia-Pacific’s key trading partners, the US and the European Union, are expected to be hit even harder, with the US economy set to contract by 5.9 per cent and Europe by 5.9 per cent.
It is unlikely Asia, despite its slightly better growth position, will be able to recover on its own, particularly because most Asian countries are heavily dependent on trade with the US and European countries.